2 July 2001: Toyota and Peugeot/Citroen (PSA Group) are to develop together a new vehicle platform to be used in joint production in Europe of replacements for a new sub-Yaris (left) and sub-106/Saxo small cars.

In a statement, both companies say this move will allow them have prices lower than those in the current small-car segment, and the project includes a high-level of standard safety performance, and excellent environmental achievements.

PSA Group says it's the latest implementation of its strategy aimed at reaching agreements on the joint development and production of mechanical components and platform elements, with the objective of obtaining economies of scale.

The deal will be signed on June 12 and will allow Toyota to gain a higher penetration in the highly competitive European market. PSA will extend its reach in eastern Europe without exorbitant investment.

Toyota currently has just 3.5% of the European market, and the Yaris - built in France and Japan - has been its biggest success there. The company has also signalled its intent to boost European sales by producing diesel engines in Europe.

PSA is likely to build a factory in eastern Europe to produce their new car, while Toyota may extend its Valenciennes Yaris plant for its version. Up to 300,000 units a year of the new vehicles are expected to be built.